Tense markets rebound across Europe

EQUITY MARKETS in Europe and the US rebounded yesterday after steep sell-offs on Monday, although the mood remained tense. The euro hit an 11-month low against the dollar ahead of the US Federal Reserve’s assessment of the US economy and warnings from rating agencies about the euro zone’s outlook preoccupied investors.

European stocks rebounded from their biggest slide in three weeks, as Spain sold more securities than it had planned at a debt auction and a report showed that investor confidence in Germany improved.

Royal Dutch Shell BP gained more than 1.5 per cent, dragging a gauge of oil producers higher.

Banks and insurers limited gains on the Stoxx 600 with Banco Santander SA and BNP Paribas SA, the largest banks in Spain and France, respectively, dropping at least 1.5 per cent.

The Stoxx Europe 600 Index rose 0.5 per cent to 237.19 at the close. The gauge pared an advance of as much as 1.2 per cent as Reuters reported that German chancellor Angela Merkel had rejected increasing the upper limit for the funds held by Europe’s planned permanent rescue facility, citing sources in her ruling coalition.

National benchmark indexes climbed in 11 of the 18 western- European markets. France’s CAC 40 Index slid 0.4 per cent and Germany’s DAX lost 0.2 per cent. The UK’s FTSE 100 advanced 1.15 per cent.

DUBLIN

Ireland outperformed many of the main European markets, mainly due to CRH, which lists on the FTSE 100 on Friday. The stock gained 30 cents as it benefited from Monday’s announcement that peer company Martin Marietta Materials is seeking a hostile takeover of Vulcan Materials. There was also a lot of interest in the stock ahead of the index inclusion on Friday, traders said.

Smurfit Kappa regained ground, having fallen back on Monday, while Glanbia was a strong performer.

Elsewhere on the index, some of the big names such as Ryanair, Paddy Power, Grafton and Aryzta lost ground, but this reflected the general market trend rather than anything material, with the default position on almost all stocks staying at “sell” in light of the current market nervousness.

There was some movement among smaller stocks.

Ormonde Mining finished the day flat, following a drilling update which said that the infill drilling programme had substantially increased both the size of and confidence in the Mineral Resource Estimate for Ormonde’s flagship Tungsten project at Barruecopardo.

Merrion Pharmaceuticals lost close to 5 per cent, after it said it was looking to raise up to €2.5 million of fresh equity in an open offer of €0.22 a share (last Friday’s closing price), to meet its cash requirements over the next 18 months.

Datalex added close to 3 per cent after if announced it had resolved its legal dispute with Australian group FlightCentre.

NEW YORK

US stocks fell for a second straight day after the Federal Reserve left monetary policy on hold and said financial market turbulence posed threats to economic growth.

Wall Street traded higher for much of the volatile session, but turned negative after the Fed’s announcement.

EUROPE

German bonds declined, pushing two-year yields up by the most in a week after Europe’s bailout fund sold the maximum amount of bills at its first auction of the securities. They climbed from near a record low as a German report showed investor confidence in Europe’s biggest economy unexpectedly increased this month, damping demand for safer assets.

Italian notes rose for a third day as the ECB was said to buy the securities. Spanish notes also advanced after the nation sold more bills than its maximum target at an auction.

“There’s a general improvement in sentiment and that weighs on bunds,” said Eric Wand, a fixed-income strategist at LloydsBank Corporate Markets in London.

“There’s some relief that the Spanish bill auction results were good and that’s given peripheral debt a bit of a bid.”

Germany plans to sell €5 billion worth of benchmark two-year notes today. The European Financial Stability Facility issued €1.97 billion of 91-day bills at an average yield of 0.2222 per cent, the Bundesbank said. Investors bid for 3.2 times the amount sold.

Italy is scheduled to sell up to €3 billion of 4.75 per cent securities maturing in September 2016 today. Spain’s two-year notes gained for a third day after it sold €4.94 billion of 12- month and 18-month bills, more than the maximum target of €4.25 billion the treasury set for the sale.

Demand for the 12-month securities rose to 3.14 times the amount sold, compared with 2.13 last month, and the bid-to-cover ratio for the longer-maturity bills was 4.97 times versus 5.96.

Yields on the notes dropped 34 basis points to 4.13 per cent, after falling 44 basis points in the previous two days. – (Additional reporting: Bloomberg)